You are in charge of managing inventory for an electronic equipment company based in Washington. You have a product, Supersonic Headphones, with annual demand of 3278 units and a purchase cost of $8 per unit. You must pay $25 to process each order and the lead time from the vendor is 4 weeks. You take ownership of the items upon placing the order. The annual RMSE of the forecast is 546 units and your firm uses a holding cost of 0.16 $/$/yr. Assume 52 weeks per year. You currently manage this product using a (s,Q) policy.

After considering all the options, your boss decides to set a 95% Cycle Service Level, but she wants you to determine how to change to a (R,S) policy where you order every quarter (13 weeks). Determine the parameters of this new policy:

Q5. Average order quantity (Q)

Q6. Order up to point (S)